Water extract (WE) of Cordyceps militaris has been reported to produce antitumor and immunomodulatory activities in vivo and in vitro. However, the therapeutic mechanism has not been known. In this study, we investigated whether water extract of C. militaris induces the phenotypic and functional maturation of dendritic cells (DC). It profoundly increased CD40, CD54, CD80, CD86, and MHC class II expression in murine bone marrow (BM)-derived myeloid DC. Endocytosis was assessed by the uptake of FITC-dextran and FITC-albumin. The ability of unstimulated DC (UT-DC) to uptake dextran and albumin was higher than that of WE- or LPS-stimulated DC (LPS-DC). Also, UT-DC secreted a low concentration of IL-12, while WE- or LPS-DC secreted higher levels of IL-12 than UT-DC. WE not only formed morphologically mature DC and clusters, but also induced predominantly functional maturation. Moreover, WE is shown to promote the cytotoxicity of specific-cytotoxic T lymphocyte (CTL) induced by DC which were pulsed with P815 tumor-lysate during the stage of antigen presentation. These results suggest that DC maturation by WE can play a critical role in the improvement of the immunoregulatory function in patients with impaired host defense.